Meg Whitman reveals how badly HP was managed, hints at pain to come.

Yesterday, as President Barack Obama and Governor Mitt Romney were preparing to debate how to fix the country's economic mess, Hewlett-Packard CEO Meg Whitman was delivering a stunning confessional speech at HP's analyst briefing day, describing how bad things were at HP and making promises to fix them. She projected that the company would continue its headlong plunge in profits for at least another year—with a full rebound not in sight until 2016.

Showing shades of her previous political aspirations, Whitman liberally mixed metaphors to describe her awakening to just how screwed HP was. "We all hope we can accelerate the timing of this journey, but as I see the challenges up close and personal, there are no silver bullets," she said. "It's going to take longer to right this ship than any of us would like."

Not all of HP's product lines, or the people who make them, will survive the "journey" Whitman outlined. There will be some serious pruning of HP's businesses, and a focus on automating more of manufacturing (and eliminating workers). And even with new products in the pipeline, Whitman said 2013 is going to be a "rebuilding year" as the company retools practically everything it does. "2014 will be the year you see real recovery and expansion," she promised. "The new products and services we've been working on will kick in big-time in 2014."

Whitman put the bulk of the blame for the company's position on the mismanagement of her predecessors. The "single biggest challenge facing HP," she said, has been the multiple changes in HP's leadership, which caused "inconsistent strategic choices and some significant execution miscues." All that shuffling at the top led to a deficit of actual leadership within the company.

The lack of central leadership left individual units to figure out things for themselves. The company's marketing? Totally uncoordinated. Its services unit? Directionless from four changes in the top in as many years, and hurting from changes in the sales force. Its products? Too many, too slowly delivered, poorly packaged. Managerial accountability? What's that?

Apparently people at HP spent so much time changing offices that nobody ever got around to actually measuring what the company did. Whitman said there were no real metrics for measuring performance or providing early warnings, and top management had been essentially flying blind. "I've learned at HP, you don't get what you expect," Whitman said. "You get what you inspect."

For those of us who have observed the company closely over the past few years, much of what she had to say was just confirmation of what we already knew. That lack of attention to detail—and the absence of a leadership that could actually say the word "excellence" with a straight face—has shown up in the kinds of products HP has brought to market. Aside from the odd flash of inspiration, there has been little from the Personal Systems group that has provoked any sort of tech adoration. But as Whitman drilled down into the specifics of what had gone awry at HP, it turns out it was even worse than it appeared. Like the proverbial shoemaker's children, HP's internal IT has gone without the sort of business-management applications that HP's services unit sells to the company's customers.

"We aren't as effective internally as we should be because of poor systems," Whitman said. "We are not as competitive as we need to be in how we go to market because of our IT systems. We haven't been using a compelling customer management or CRM system for years." And the company's human resources systems were also a mess. HP is in the middle of implementing a whole flight of new systems to fix the problems, including Salesforce.com's CRM.

Worse still, Whitman revealed, HP has underinvested in research and development, and can't get innovations out of the lab and into products fast enough. Prior to this year, "it's been over 7 years since we've had a new lineup of multifunction printers," Whitman said. HP doesn't have an innovation problem, Whitman said—it has a problem actually doing anything with its innovations.

Whitman also shared how out of control the company's product lines were when she arrived a year ago. "When Todd Bradley took over [as executive vice president of] the Personal Systems Group," she said, "he was surprised to find that we made over 2,000 types of laser printers." Whitman said that HP would reduce that number by 20 percent in the next year—the beginning of a larger product merge and purge aimed at simplifying the company's logistics and lowering costs.

This sort of public airing of corporate dirty laundry is rare. But HP has become accustomed to having its internal chaos exposed to scrutiny—or even used as a marketing weapon against it, thanks to its legal wranglings with Oracle. According to some reports, Whitman decided that it was time to just dump all the bad news out at once, rather than slowly spooning it out over the next year as the company's revenue slides—and take the hit now before the next quarterly earnings call.

But there's sure to be plenty of bad news to come. The 14 percent dive HP's stock took after Whitman's presentation may just be a blip, but another year of declining profits and shrinking cash could make the company a bigger target for takeover as the PC market continues to consolidate and the server market remains stalled. Even when the company recovers, Whitman didn't project growth that was any faster than the overall growth of the global economy—a stealthy bit of expectation management, but also a signal that HP will be a much smaller, much different company by then.

Promoted Comments

...surprised to find that we made over 2,000 types of laser printers." Whitman said that HP would reduce that number by 20 percent in the next year...

This is astonishing. And this isn't a product line where "it comes in 8 different colors" is inflating the count either. But 2,000 – 20% is still 1600. This is a bit like saying you're only going to jump off the 80th floor of the Empire State Building instead of the 100th, so everything will be OK.

I am not sure why people think cleaning your dirty laundry in public is a good thing. The last time this happened was Elop with Nokia, and that almost certainly didn't help Nokia.

How do you think companies who were thinking of going with HP will respond to this? What are HP salespeople gonna tell their clients when their CEO herself is saying they havent done any innovating for more than half a decade, and that there is no coordination within the company?

This is nothing but an attempt for Whitman to buy 5 years as CEO, or at the very least, not be blamed if the transition does not succeed. It does not in any ways help HP (again, I am talking about making it public. Most CEOs know that there are problems with the company, but don't air that in public, except in massive generalities, or accompanied with a plan laying out the changes which will fix the issues aired. She did neither).

1696 posts | registered Apr 8, 2007

Sean Gallagher
Sean is Ars Technica's IT and National Security Editor. A former Navy officer, systems administrator, and network systems integrator with 20 years of IT journalism experience, he lives and works in Baltimore, Maryland. Emailsean.gallagher@arstechnica.com//Twitter@thepacketrat